Setting the Pace for SCS - J.P. Morgan 41st Annual Healthcare Conference
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Setting the Pace
for SCS
J.P. Morgan 41st Annual
Healthcare Conference
D. KEITH GROSSMAN
CHAIRMAN, CEO & PRESIDENT
JANUARY 9, 2023
Forward-Looking Statements In addition to historical information, this presentation contains forward-looking statements reflecting the company's current beliefs and expectations of management made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including: our expectations for full year 2023 worldwide revenue, including PDN revenue; our belief that we will continue to see a gradual overall trend of SCS market recovery, which we expect to continue in 2023; our belief that the building blocks are in place for attractive growth and leverage going forward and the challenges to the business are gradually but steadily improving and will continue to do so through 2023; our belief that we have exciting opportunities to drive profitability and cash flow, including our HFX iQ™ launch expected in early 2023; our belief that the PDN segment is growing rapidly and NSBP will capture larger portion of the TAM; our expectation that we will experience gross margin expansion from our Costa Rica manufacturing operations, increasing over 3-5 years; our expectations that 2023 will be a year of growth and progress on the path to profitability; and our belief that we are positioned to outperform and lead market recovery. These forward-looking statements are based upon information that is currently available to us or our current expectations, speak only as of the date hereof, and are subject to numerous risks and uncertainties, including our ability to successfully commercialize our products; our ability to manufacture our products to meet demand; the level and availability of third-party payor reimbursement for our products; our ability to effectively manage our anticipated growth and the costs and expenses of operating our business; our ability to protect our intellectual property rights and proprietary technologies; our ability to operate our business without infringing the intellectual property rights and proprietary technology of third parties; competition in our industry; additional capital and credit availability; our ability to attract and retain qualified personnel; and product liability claims. These factors, together with those that are described in greater detail in our Annual Report on Form 10- K filed on February 23, 2022, as well as any reports that we may file with the Securities and Exchange Commission in the future, may cause our actual results, performance or achievements to differ materially and adversely from those anticipated or implied by our forward-looking statements. We expressly disclaim any obligation, except as required by law, or undertaking to update or revise any such forward-looking statements. Our preliminary operating results for the fourth quarter and full-year ended December 31, 2022 are subject to adjustment as we complete our year-end audit and other processes and are not necessarily indicative of our operating results for any future periods. 2
Non-GAAP Financial Measures
Management uses certain non-GAAP financial measures, most specifically Adjusted EBITDA, as a supplement
to GAAP financial measures to further evaluate the company’s operating performance period over period,
analyze the underlying business trends, assess performance relative to competitors and establish operational
objectives.
Management believes it is important to provide investors with the same non-GAAP metrics it uses to evaluate
the performance and underlying trends of the company’s business operations to facilitate comparisons to its
historical operating results and evaluate the effectiveness of its operating strategies. Disclosure of these non-
GAAP financial measures also facilitates comparisons of the company’s underlying operating performance
with other companies in the industry that also supplement their GAAP results with non-GAAP financial
measures.
EBITDA is a non-GAAP financial measure, which is calculated by adding interest income and expense, net;
provision for income taxes; and depreciation and amortization to net income. In calculating non-GAAP
Adjusted EBITDA, the company further adjusts for the following items:
Stock-based compensation expense – The company excludes non-cash costs related to the company’s
stock-based plans, which include stock options, restricted stock units and performance-based restricted
stock units as these expenses do not require cash settlement from the company.
Litigation-related expenses and charges (credits) – The company excludes legal and professional fees as
well as charges and credits associated with certain legal matters, which management considers not
related to the underlying operating performance of the business.
Full-year guidance excludes the impact of foreign currency fluctuations.
The non-GAAP financial measure should not be considered in isolation from, or as a replacement for, the most
directly comparable GAAP financial measures, as it is not prepared in accordance with U.S. GAAP.
Amounts may not add due to rounding.
3
NEVRO:
A step ahead
Grew during challenging environment in 2022
while investing to create future value
Indications in three, large under-penetrated
markets
Unique and differentiated 10 kHz Therapy
New HFX iQ™ launch on tap in early 2023;
AI-powered pain management that provides
personalized pain relief
Exciting opportunities to drive
profitability and cash flow
4 4
Continued signs of recovery
Market challenges are steadily receding, and we see
improvement in our trial procedures and trial to perm
conversions.
Market expansion opportunities
Painful Diabetic Neuropathy (PDN) segment growing
rapidly, and Non-Surgical Back Pain (NSBP) set to
capture larger portion of TAM.
HFX iQ™ launch
Revolutionary new AI-powered HFX iQ platform works
to improve each patient’s journey with personalized
pain management plans.
Opportunities grow as Meaningful opportunities to drive profitability
recovery progresses
New Costa Rica facility offers opportunity to improve
margin profiles as we continue to scale; technology-
enabled efficiencies.
5
Conditioned and prepared
to go the distance
Forward momentum from 2022
~100K+ patients now 10 kHz SCS Therapy for PDN included
implanted with HFX Therapy in ADA Clinical Compendium /
AACE Clinical Practice Guideline
FDA approval for expanded
NSBP labeling Settlement of IP litigations with BSX
Superior long-term clinical data sets – HFX iQ™ FDA approval
SENZA-PDN and SENZA-NSRBP RCTs
Costa Rica FDA approval
Significant PDN payer progress:
More than doubling of PDN Continued progress on
covered lives operating expense control
6
Trial rates in U.S.
steadily improving
Growth rate (U.S. trials) vs. prior year
2H 2021 1H 2022 2H 2022
13%
12%
-1%
7
Outpacing the competition with
consistent performance
U.S. MARKET SHARE ESTIMATE BY COMPETITOR
40%
Continuing to win in a
recovering market
For Q4 and full-year 2022, U.S.
30%
revenues were up +13% and +7%,
respectively, vs. prior year
20%
Based on recent refresh of claims
data, believe we continued to gain
10% market share throughout 2022
Nevro procedure growth continues to
0% outperform market procedure growth
2015 2016 2017 2018 2019 2020 2021 2022 Est.
on Y/Y basis compared to same
Competitor 1 Competitor 2 Competitor 3
periods in 2019 and 2021
Nevro share trend
8
Sources: Internal Nevro Market Model; Komodo claims data
Multiple
Growth
Drivers
9
Limited U.S. release underway
Broad U.S. launch planned for early 2023
Only SCS system that
truly personalizes care
The first SCS system that uses big data
and artificial intelligence to optimize
and maintain pain relief using each
patient's individual responses1
10
¹ Senza HFX iQ™ uses a fixed set of instructions to provide optimized treatment recommendations that utilize direct patient input from assessments on pain and quality of life measures.Only SCS system that gets smarter over
time by learning from patients¹
80K+
implanted patients
20M+
outcomes datapoints
Algorithm™
of patients reported
87% moderate to great
improvement in symptoms.²
of patients prefer using
92% digital interface to
adjust therapy.²
of patients were satisfied
82% or very satisfied with using
digital interface.²
Senza HFX iQ™ uses a fixed set of instructions to provide optimized treatment recommendations that utilize
11
1
direct patient input from assessments on pain and quality of life measures.
2 Nevro CA2018-6 U.S. Patient Interface Clinical Study.for PDN
Most Effective Treatment for
Refractory Painful Diabetic
Neuropathy¹
HFX is the only HIGH-FREQUENCY (10 kHz)
paresthesia-independent therapy
approved by the FDA to treat PDN
1. Petersen EA, Stauss TG, Scowcroft JA, et al. Effect of high frequency (10-kHz) spinal cord stimulation in patients with painful diabetic neuropathy: a randomized clinical trial. JAMA Neurol. 2021;78(6):687-698.
12PDN patients suffer from Bladder /
bowel
chronic, debilitating pain
problems
with no good options. Muscle
weakness
What is PDN?
Sensitivity to touch
Nerve damage caused by chronically high
blood sugar and diabetes Coordination
difficulties
Most common complication of diabetes
Develops 5-10 years post-onset of diabetes
Symptoms Stabbing
Numbness, loss of sensation, and pain
sometimes pain in the feet, legs, or hands
Numbness, especially
Consequences in arms and legs
May not feel heat, cold, or pain in feet, legs, or hands
Unaware of cuts or wounds
Burning
Infections, ulcers, amputations, falls, hospital admissions, pain
QoL, or even death
13
Sources: Trinity Partners Market Research 2017; Mayo Clinic; Nevro Senza-PDN RCT 6-month manuscriptPDN: Large patient population with
significant unmet need
PREVALENCE INCIDENCE
Diagnosed PWD with PDN Refractory to CMM TAM
28.7 MM PATIENTS 5.7 MM PATIENTS 2.6 MM PATIENTS 140K-200K PATIENTS
Current Treatment Options Demonstrate Mild Efficacy and Low Adherence
PWD = Patients with Diabetes PDN = Painful Diabetic Neuropathy CMM = Conventional Medical Management TAM = Total Addressable Market
Sources: CDC National Diabetes Statistics Report 2022; Schmader KE. Epidemiology and impact on quality of life of postherpetic neuralgia and painful diabetic neuropathy. Clin J Pain. 2002;18(6):350-354; 14
Trinity Partners Market Research 2017HFX™: A league of its own
With ~2x the responder rate and pain relief, HFX
is the most effective SCS solution for PDN 1
Highest published
RESPONDER RATE COMPARISON
(All who received treatment cohort)
Day Night Overall 86 % 5Responder Rate
86%
83%
Highest published
53%
47%
77% % Pain Relief 6
47%
35%
Only SCS system to demonstrate
MDT RCT
6-mo 2014 (n=17)2
Nevro 10 kHz RCT
6-mo 2021 (n=90)3
MDT RCT
24-mo 2015 (n=17)4
Nevro 10 kHz RCT
24-mo 2022 (n=90)5
72% Neurological Improvements 3,5
1. Strand N, Burkey A. Neuromodulation in the treatment of painful diabetic neuropathy: a review of evidence for spinal cord stimulation. J Diabetes Sci Technol. November 2021.
2. Slangen R, Schaper NC, Faber CG, et al. Spinal cord stimulation and pain relief in painful diabetic peripheral neuropathy: a prospective two-center randomized controlled trial. Diabetes Care. 2014;37(11):3016-3024.
3. Petersen EA, Stauss TG, Scowcroft JA, et al. Effect of high frequency (10-kHz) spinal cord stimulation in patients with painful diabetic neuropathy: a randomized clinical trial. JAMA Neurol. 2021;78(6):687-698.
4. van Beek M, Slangen R, Schaper NC, et al. Sustained treatment effect of spinal cord stimulation in painful diabetic peripheral neuropathy: 24-month follow-up of a prospective two-center randomized controlled trial. Diabetes Care. 2015;38(9):e132-134.
5.
6.
Petersen EA, et al. Treatment of painful diabetic neuropathy (PDN): high-frequency (10 kHz) spinal cord stimulation (SCS) provides significant, durable pain relief for PDN patients. PAINWeek Conference 2022. Las Vegas, Nevada.
Petersen EA, Stauss TG, Scowcroft JA, et al. Durability of high-frequency 10-kHz spinal cord stimulation for patients with painful diabetic neuropathy refractory to conventional treatments: 12-Month results from a randomized controlled trial. Diabetes Care. Nov 2021.
15Exceptional reimbursement progress for PDN
Fueled by robust clinical results and a comprehensive clinical dossier
Commercial
Payers 60% Recent PDN
~66%* coverage expansion
PAYER MIX FOR PDN Patients Covered
PDN PATIENTS
Up from
25%
in 2021
Medicare 40%
Source: Payer Mix - IQVIA Claims Data; Other data cited as of 12/31/2022
*Assumes finalization of proposed positive Local Coverage Determinations from Medicare
Administrative Contractors Novitas and First Coast. (As of 12/31/22, ~54% of patients already covered.)
16PDN already
delivering Worldwide PDN revenue
revenue gains ~$13.4M
~$17.3M
~$11.0M
Broader penetration
~$6.0M
and greater revenue ~$1.7M
~$4.0M
expected in 2023
3Q 21 4Q 21 1Q 22 2Q 22 3Q 22 4Q 22
PDN represented ~16% of worldwide
permanent implant procedures in 4Q’22
4Q’22 U.S. PDN trials grew ~15% over
3Q’22
PDN ~20% of U.S. trials in 4Q’22, up from
~18% in 3Q’22
17NSBP: Clinical data
Total Addressable Market
driving patient access
and market growth $11.4B Annual
FDA Approval of High-Frequency 10 kHz
Therapy for NSBP
$510M
Current
Market
Development of clinical data supports
continued market penetration:
Expanded payer coverage
Increased referrals for Only ~5%
10 kHz Therapy penetrated
24-month data to be presented at
NANS 2023, publication to follow
18
NSBP: Non-Surgical Back PainNANS 2023:
Significant Clinical Presence
18 Abstracts Accepted for Presentation
TWO LATE-BREAKING PRESENTATIONS:
SENZA-NSRBP RCT – 24-month results SENZA-PDN RCT – 24-month results
Friday, January 13, 2023 Saturday, January 14, 2023
1:30-3:30 pm PT 11:20-11:50 am PT
Plenary Session II E3 – Critical Updates in Neuromodulation
Presenter: Dr. Leo Kapural Presenter: Dr. Erika Petersen
HIGHLIGHTS
Complete 24-month results for SENZA-PDN and SENZA-NSRBP RCT
SENZA-PDN RCT, quality of life data,
with 216 randomized participants for 10 kHz spinal cord stimulation
from 18 study centers
10-year Real-World data (Poster),
Complete 24-month results for on efficacy of 10 kHz spinal cord
SENZA-NSRBP RCT, stimulation
with 159 randomized participants
from 15 study centers
19FDA approval for our new global
manufacturing operations in Costa Rica Gross Margin
Insourced global manufacturing expansion,
operations expected to drive increasing over
margin gains 3-5 years from
high-60s% to
mid-70s%
Enables greater control and efficiency in
manufacturing processes
Fully scalable to accommodate growth and
expansion of product platform
Represents investment of ~$21 million in capital
and operating expense by the end of 2022
20Continued progress on
operating expense control
YTD 3Q’22 vs YTD 3Q’19 OpEx
($ millions)
$24.0M
$263.2M $280.6M $256.6M YTD 3Q’22 adjusted
operating expenses are Meaningful leverage
down approximately opportunities to drive profitability
3% compared to
YTD 3Q’19*
Commercial organization
New Costa Rica manufacturing operations
YTD 3Q ’19 YTD 3Q ’22 YTD 3Q ’22 Continued product enhancements
Adj. OpEx* OpEx Adj OpEx*
Technology-enabled efficiencies
*Adjusted Operating Expense only excludes litigation and PDN expenses. 3Q 2022 OpEx also excludes $105.0 million of certain litigation credits. Amounts may not add due to rounding.
212023 expected to be a year
of growth and progress on
path to profitability for PDN Launch
Expansion
10% to 12%
Worldwide (WW) revenue
growth
2023 Scale
$445M to $455M
Core market WW revenue guidance, Costa Rica
recovery
includes $75M-$85M PDN manufacturing
revenue
NSBP
advancement
22NEVRO:
Positioned to Outperform
Pace-setting leader in three large, under-
penetrated SCS markets
Unique and differentiated 10 kHz
technology with superior outcomes
Multiple growth drivers via
expanded indications
Continuing recovery of core market
Meaningful leverage opportunities to
drive profitability and cash flow
23For additional information, please contact:
Julie Dewey, IRC
Chief Corp Communications and IR Officer
julie.dewey@nevro.com
o: (650) 433 3247 | c: (209) 613 6945
www.nevro.com • NYSE: NVRO
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